Banks have been confiscating goods for lending faster than borrowers have been defaulting on debt. Confiscation lowers the standard of living of the banks' victims, and additional debt to GDP slows the economy more. Price distortion from printing misallocates capital, making the west less able to compete for oil and other imported resources.

Banks created the current credit crisis by printing too much, and now banks are creating a yet another future credit crisis by printing too much now.

Consumer and household debt at least hasn't grown - there hasn't been any lending, while the vast majority of household debt (mortgages) are being paid down.

If business debt has grown, then that has happened through rolling over of loans (possibly bad debts?) to preferred existing clients. Start up finance, trade finance and general business finance is completely unavailable now - whatever the market opportunities.

That story's hard to reconcile with the above.

Perhaps this is a story of low bond yields - the market value of "safe" bonds has soared as yields have collapsed. In other words, the market value of that debt is now a higher multiple of GDP? Even in Spain (often claimed to be at default risk) yields are just 4% - lower than before the crisis (so the debt is worth more in terms of GDP).

Meanwhile, other assets which are stressed are still being recorded at book value, causing illiquidity. High volatility and uncertainty undermine new lending and investment - but profits can be ploughed into more safe bonds, driving yields further into the ground, and driving up "debt".

If that's the story, the government debt bubble is going to crash spectacularly when better investment opportunities open elsewhere. Hopefully the banks aren't purchasing too many bonds at these high prices, or we really could have default risk...

The US has the same (actually, worse) overpricing of government bonds, but it seems that cuts to household lending and high corporate saving are at least bringing down total debt (that's probably an unnecessary structural shift - many households are keen and able to carry more debt; many businesses probably should be more geared and returning more to their shareholders).

For comparability with the European numbers, total state debt should probably be added to the federal debt numbers.

Just counting issued state debt adds 20% of GDP to the US government debt burden.

Again, that says nothing of (often massive) pension liabilities.

The US government has more debt that any European country besides Greece (yes - more debt than Italy). Fortunately, American debt is also vastly more liquid, with much lower real interest rates payable on that debt (for now at least - thanks in part to Arab and Asian saving & investment patterns).

When consumers and businesses get over-leveraged, they have to pay it down eventually, which cuts their spending. And that, in turn, cuts private economic activity -- see our current recession. The only way to ameliorate that is by increased government spending. And since lower private economic activity cuts government tax revenue from income or sales taxes, that means more government debt. (The alternative, of course, is to cut government spending to restrain debt. Which further reduces total economic activity and makes the recession worse.)

So any review of deleveraging has to take account of who is, or is not, deleverageing if it is to make any sense at all. While you did that, it is not clear from Buttonwoods post if Mr Baz did. If he didn't, that doesn't speak well of his analysis. If he did, Buttonwood really ought to have made mention of it.

Less than half of Europe is within the 60 percent debt-to-GDP and 3 percent deficit-to-GDP guidelines as mandated by the EU despite the fact that last year was not technically a recession for most nations. Four nations alone are responsible for 69 percent of the EU27 debt, surprisingly, Greece and Spain are not among them.